Articles Tagged "Selling your home"
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23
How to sell your house: A complete guide for sellers
How to sell your house: A complete guide for sellers
Most home sellers dream of a stress-free sale in which they simply list their house, quickly find a qualified buyer, collect the cash and hand over the keys. If only it were that simple! In reality, selling a home involves many moving parts — some that you can control, and some that are out of your hands.
For example, geography might influence how long your house lingers on the market or how much mark-up you can get away with. Where competition is high and inventory is low, odds are you'll sell faster and command a higher price. Conversely, in places where home sales have cooled, homeowners will likely have to work harder to attract the right buyer.
Given the unprecedented growth in the housing market since the coronavirus pandemic, there has been an uptick in pricing and bidding wars, and extremely low levels of inventory, over the past two years. However, the market is expected to settle down a bit — and is, in fact, already cooling considerably in some areas — due to rising interest rates (including for mortgages) and recession fears.
So, you'll want to be prepared as a seller and control the factors that could have a big impact on your bottom line. Things like hiring a great real estate agent and maximizing your home's online appeal can translate into a more seamless closing — and more money in the bank.
Here are 12 steps to take to sell your home in 2022:
1. Hire an agent who knows the market
The internet makes it simple to delve into real estate agents' sales history and professional designations, so you can choose the right person to work with. Look up agents' online profiles to learn how long they've been in the industry, how many sales they've done and what designations they may have earned. Pay attention to how and where they market their listings, and whether or not they use professional photos.
"Any designation they've earned is a huge plus, because it's a sign they've taken the time to learn about a particular niche," says Jorge Guerra, Global Liaison for the National Association of Realtors.
Some homeowners might be tempted to save on paying a commission and instead sell their home themselves, without an agent. This is known as "for sale by owner," or FSBO. The amount sellers stand to save on those fees can be thousands of dollars, usually 5 percent or 6 percent of the total sale price.
However, an experienced agent does a lot to earn their fee. For example, they can expose your house to the broadest audience and negotiate on your behalf to garner the best offers possible. If you go it alone, you'll have to personally manage prepping your home, marketing it, reviewing buyers' offers and handling all the negotiations and closing details.
When working with an agent and negotiating a commission, keep this in mind: Real estate fees have fallen to all-time lows. So you might be able to get a break at the closing table.
2. Set a timeline for selling your home
Selling a house is a major undertaking that can take two to four months from start to finish — or much longer, depending on local market conditions and the level of inventory available.
As soon as you decide to sell your house, jump right into researching real estate agents to find someone with the right experience for your situation.
At least two or three months before you plan to list, consider getting a pre-sale home inspection (more on that below!) to identify any problem areas, especially structural or mechanical issues that might need addressing to facilitate a sale. Leave enough time to schedule necessary repairs.
About a month before listing your house, start working on staging and deep cleaning in preparation for taking photos.
Here's a checklist of things to do before listing your home:
- Research and interview real estate agents.
- Declutter, perhaps moving excess items to a storage unit.
- Get an optional home inspection to identify any issues.
- Schedule repairs if needed.
- Deep clean.
- Stage the house.
- Have professional photos taken.
3. Get a pre-sale home inspection
A pre-sale home inspection is optional, but it can be a wise upfront investment. A detailed inspection report can identify any structural or mechanical problems before you list your home for sale. It may cost a few hundred dollars, but it will alert you in advance of issues that buyers will likely flag when they do their own inspection later in the process.
By being a few steps ahead of the buyer, sellers might be able to speed up the selling process by doing repairs in tandem with other home prep work. This means by the time the house hits the market, it should be ready to sell, drama-free and quickly.
4. Don't waste money on needless upgrades
If you're going to spend money on costly upgrades, make sure that the changes you make have a high return on investment. It doesn't make sense to install new granite countertops, for example, if you only stand to break even or even lose money on them. Plus, these improvements may not be necessary to sell your home for top dollar, particularly if inventory levels are low in your area.
Here's where a good real estate agent can help guide you. They often know what people expect in your area and can help you plan upgrades accordingly. If local shoppers aren't looking for super skylights or a steam shower, then it doesn't make sense to add them. A fresh coat of neutral paint, new carpet and a spruced-up landscape are typically low-cost ways to make a great first impression.
In general, updates to the kitchen and bathrooms provide the highest return on investment. If you have old cabinetry, you might be able to simply replace the doors and hardware for an updated look. For example, you can swap out those standard-issue kitchen cabinet doors for modern, Shaker-style doors in a weekend without breaking the bank.
5. Get professional photos
Work with your real estate agent to schedule a photographer to capture marketing photos of your home. High-quality photos are critical, since maximizing your home's online appeal can make all the difference between a quick sale or a listing that languishes.
Some real estate agents build professional photography and virtual online tours into their suite of services. If they don't, though, you might want to seek a photographer out on your own. The fee for professional photography will vary based on the size of your home, its location and how long it takes to shoot the property.
A professional photographer, with a strong portfolio, knows how to make rooms appear bigger, brighter and more attractive. The same goes for your lawn and outdoor areas. Dimly lit online photos can turn off homebuyers before they even have a chance to read about the lovely bike path nearby or the new roof you just installed, so well-taken photos can really pay off
6. Put your house on the market
Here are tips to get your home market-ready and attract buyers for a speedy sale:
Focus on the home's online appeal
You've probably heard of curb appeal, but professionals say online appeal is now even more important. "Your home's first showing is online," Guerra says. "The quality of your web presentation will determine whether someone calls and makes an appointment or clicks on the next listing."
Stage it and keep it clean for showings
Real estate agents will often suggest that sellers stage their homes. Staging a home simply means removing excess furniture, personal belongings and unsightly items from the home while it's on the market, and arranging rooms for optimal flow and purpose. If you're in a slower market or you're selling a luxury home, investing in a professional stager could help you stand out. Nationally, professional home staging costs an average of around $1,728, according to HomeAdvisor, but prices can range between about $749 and $2,825.
Let someone else show the house
Make yourself scarce when potential buyers come to view your home. Let them imagine themselves in the space, free from the distraction of meeting and talking to you. Generally, buyers are accompanied by their own real estate agent to view your home. You can also ask your own agent to be present at showings.
"Seeing the current homeowner lurking can cause buyers to be hesitant to express their opinions," says Grant Lopez, Realtor at KW Heritage and former chairman of the San Antonio Board of Realtors in Texas. "It could keep them from really considering your home as an option."
7. Set a realistic price
Even in competitive markets, buyers don't want to pay more than what the comparables, or "comps" show, so it's crucial to get the pricing right. Going too high can backfire, while underestimating a home's value might cause you to leave money on the table.
To price your home right from the start, consult your neighborhood's comps. These are data sheets about recently sold properties in a specific area. At a glance, you can get an idea of what homes around you are selling for.
"A frequent mistake sellers make is pricing a home too high and then lowering it periodically," Lopez says. "Some sellers think this practice will yield the highest return. But, in reality, the opposite is often true. Homes that are priced too high will turn off potential buyers, who may not even consider looking at the property."
In addition, homes with multiple price reductions may give buyers the impression there's something wrong with your home's condition, or that it's undesirable. So it's best to eliminate the need for multiple reductions by pricing your home to attract the widest pool of buyers from the start.
8. Review and negotiate offers
After your home officially hits the market and buyers have seen it, ideally the offers will start rolling in. This is where a real estate agent (or attorney) is your best advocate and go-to source for advice. If your local market is competitive and favors sellers, buyers will likely offer at or above asking price. You might even get multiple bids. On the other hand, if sales are slow in your area and you don't get many offers, you may have to be open to negotiating.
When you receive an offer, you have a few choices: Accept the offer as it is, make a counteroffer or reject the offer.
A counteroffer is a response to an offer, in which you negotiate on terms and price. Counteroffers should always be made in writing and have a short timeframe (48 hours or less) for the buyer to respond. You can offer a credit for paint and carpet, but insist on keeping your original asking price in place, for example. Or, you might offer to leave behind certain appliances to sweeten the deal.
If you're lucky enough to get multiple offers, you might be tempted to simply go with the highest one. But look closely at other aspects of the offer too, such as:
- Form of payment (cash versus financing)
- Type of financing
- Down payment amount
- Contingencies
- Requests for credits or personal property
- Proposed closing date
Be mindful that if a buyer is relying on lender financing, the property has to be appraised. Any shortfall between the purchase price and appraised value will have to be made up somewhere, or the deal could fall apart.
9. Anticipate seller closing costs
Both the homebuyer and seller have closing costs. The home seller typically pays the real estate agent's commission, usually around 5 percent to 6 percent of the home's sale price.
Some other costs commonly paid by the seller include:
- Government transfer tax
- Recording fees
- Outstanding liens
- Attorney fees
Additionally, if the buyer has negotiated any credits to be paid at closing for repairs or closing costs, the seller will pay those too. Your real estate agent or the closing agent should provide you with a complete list of costs you'll be responsible for at the closing table. While the buyer typically pays a bulk of closing costs, anywhere from 2 percent to 4 percent of the sales price, be aware that you might have to pay some fees, too.
10. Weigh the tax implications
The good news is, many home sellers won't owe taxes on profits from the sale of their primary home. If you've owned and lived in your home for at least two out of the previous five years before selling it, then you will not have to pay taxes on any profit up to $250,000. For married couples, the amount you can exclude from taxes increases to $500,000. However, if your profit from the home sale is greater than that, you need to report it to the IRS on your tax return as a capital gain.
11. Gather necessary paperwork to close
There's lots of paperwork needed to properly document a home sale. Organize it all in one place to help things go more quickly. Some of the main documents you'll need to gather include:
- Your home's original purchase contract
- Property survey, certificate of occupancy and certificates of compliance with local codes
- Mortgage documents
- Tax records
- Appraisal from your home purchase
- Homeowners insurance
- Home inspection report, if you had one
12. Consider hiring a real estate attorney
Not all states require sellers to bring a real estate attorney to the closing. Hiring one could cost a couple thousand dollars, but the expense might be worth it to protect such a large financial transaction. (Especially if you're selling your home solo.)
An attorney can help fill out paperwork, review contracts and documents, identify potential issues and ensure the sale goes as smoothly as possible. An attorney would also be able to spot title issues that could hold up your sale for weeks or months — or even torpedo the deal — such as:
- Outstanding liens or judgments or other encumbrances
- Trust issues
- Mortgage balances
- Tax issues
- Encroachments
19
Earnest Money: What It Is and How Much It Is in Real Estate
Earnest Money: What It Is and How Much It Is in Real Estate
What Is Earnest Money?
Earnest money is a deposit made to a seller that represents a buyer's good faith to make a purchase such as the acquisition of a new home. The money gives the buyer extra time to get financing and conduct the title search, property appraisal, and inspections before closing. In many ways, earnest money can be considered a deposit on a home, an escrow deposit, or good faith money.
KEY TAKEAWAYS
- Earnest money is essentially a deposit a buyer makes on a home they want to purchase.
- A contract is written up during the exchange of the earnest money that outlines the conditions for refunding the amount.
- Earnest money deposits can be anywhere from 1–10% of the sales price, depending mostly on market interest.
- Should a buyer break the terms of the contract, they may be at risk of losing their earnest money deposit.
- However, there are a number of potentially agreed-upon contingencies that may protect the buyer from backing out of a deal but still keeping all of their earnest money.
Understanding Earnest Money
In most cases, earnest money is delivered when the sales contract or purchase agreement is signed, but it can also be attached to the offer. Once deposited, the funds are typically held in an escrow account until closing, at which time the deposit is applied to the buyer's down payment and closing costs.
When a buyer decides to purchase a home from a seller, both parties enter into a contract. The contract doesn't obligate the buyer to purchase the home, because reports from the home appraisal and inspection may later reveal problems with the house. The contract does, however, ensure the seller takes the house off the market while it's inspected and appraised. To prove the buyer's offer to purchase the property is made in good faith, the buyer makes an earnest money deposit (EMD).
The buyer might be able to reclaim the earnest money deposit if something that was specified ahead of time in the contract goes wrong. For instance, the earnest money would be returned if the house doesn't appraise for the sales price or the inspection reveals a serious defect—provided these contingencies are listed in the contract.
In general, earnest money is returned to the buyer if the seller terminates the deal but is awarded to the seller if the buyer unreasonably terminates the deal.
How Much Are the Earnest Money Amounts?
While the buyer and seller can negotiate the earnest money deposit, it often ranges between 1% and 2% of the home's purchase price, depending on the market. In hot housing markets, the earnest money deposit might range between 5% and 10% of a property's sale price.
While the earnest money deposit is often a percentage of the sales price, some sellers prefer a fixed amount, such as $5,000 or $10,000. Of course, the higher the earnest money amount, the more serious the seller is likely to consider the buyer. Therefore, a buyer should offer a high enough earnest deposit to be accepted, but not one so high as to put extra money at risk.
A seller may also require ongoing, periodic earnest deposits to have a prospective buyer continue to show good faith during their due diligence process. For example, a seller may require a buyer to make monthly earnest deposits on a fixed schedule over a three month due diligence period. Should the buyer fail to meet any earnest money deposit requirements, the seller may be entitled to bring the property back to market and potentially recover losses via keeping portions of the earnest money.
How Is Earnest Money Paid?
Earnest money is usually paid by certified check, personal check, or a wire transfer into a trust or escrow account that is held by a real estate brokerage, legal firm, or title company. The funds are held in the account until closing, when they are applied toward the buyer's down payment and closing costs.
It's important to note that escrow accounts, like any other bank account, can earn interest. If the earnest funds in the escrow account earn interest of more than $600, the buyer must fill out tax form W-9 with the IRS to receive the interest.1
Is Earnest Money Refundable?
Earnest money isn't always refundable. The good news for buyers is in most situations, as long as a buyer acts in good faith, earnest money is refundable. As long as any contract agreements are not broken or decision deadlines are met, buyers usually get their earnest money back. Specific conditions where buyers often get their earnest money back include:
- If a home inspection reveals there are material issues with a property being sold. The buyer can usually choose to negotiate who is responsible for the repairs or can back out of the purchase.
- If a home appraises for lower value than the agreed purchase price. The buyer can negotiate a lower purchase price or can back out of the purchase price.
- If a buyer is unable to sell their current house (as long as this home sale contingency is agreed upon).
- If a buyer is unable to obtain a loan/financing (as long as this funding contingency is agreed upon).
Every situation is different, but broadly speaking, the seller gets to keep the earnest money if the buyer decides not to go through with the home purchase for reasons not specified as part of the contract. For example, if a buyer simply has a change of heart decides not to buy the property, the seller is most likely entitled to retain earnest money proceeds.
Protecting Your Earnest Money Deposit
Prospective buyers can do several things to protect their earnest money deposits.
- Make sure contingencies for financing and inspections are included in the contract. Without these, the deposit could be forfeited if the buyer can't get financing or a serious defect is found during the inspection.
- Ensure contract terms are in writing. The contract agreement between a buyer and seller should be in writing. This clarifies any misunderstandings and sets the precedence for terms of the agreement. Amendments to the contract are always allowable, but ensure that every iteration of the agreement is in writing and signed by both parties.
- Read, understand, and abide by the terms of the contract. For example, if the contract states the home inspection must be completed by a certain date, the buyer must meet that deadline or risk losing the deposit—and the house.
- Utilize an escrow account to hold funds. Do not send escrow money directly to the seller; if the funds are in direct possession by the other party, they can control the funds and not release funds even if you are entitled to earnest money refunds.
- Make sure the deposit is handled appropriately. The deposit should be payable to a reputable third party, such as a well-known real estate brokerage, escrow company, title company, or legal firm (never give the deposit directly to the seller). Buyers should verify the funds will be held in an escrow account and always obtain a receipt.
Example of Earnest Money
Suppose Tom wants to buy a home worth $100,000 from Joy. To facilitate the transaction, the broker arranges to deposit $10,000 as a deposit in an escrow account. The terms of the subsequent agreement signed by both parties state that Joy, who is currently living in the home, will move out of it within the next six months.
However, Joy is unable to find another place of residence by moving day. As a result, Tom cancels the transaction and gets his deposit money back. The deposit money has earned interest of $500 from the escrow account during this time period. Since the amount is less than $600, Tom is not required to fill out an IRS form to retrieve the amount.1
What Is an Earnest Money Payment?
In real estate, earnest money is effectively a deposit to buy a home. Usually, it ranges between 1-10% of the home's sale price. While earnest money doesn't obligate a buyer to purchase a home, it does require the seller to take the property off of the market during the appraisal process. Earnest money is deposited to represent good faith in purchasing the home.
Who Keeps Earnest Money If a Deal Falls Through?
Earnest money gets returned if something goes awry during the appraisal that was predetermined in the contract. This could include an appraisal price that is lower than the sale price, or if there is a significant flaw with the house. Importantly, though, earnest money may not be returned if the flaw was not predetermined in the contract or if the buyer decides not to purchase the house during an agreed-upon time period.
How Can Earnest Money Be Protected?
To protect an earnest money deposit, prospective buyers can follow a number of precautionary steps. First, buyers can ensure that contingencies apply to defects, financing, and inspections. This protects the deposit from being forfeited in the case that a major flaw is discovered, or that financing is not secured. Second, carefully read and follow the terms of the contract. In some cases, the contract will indicate a certain date by which the inspection must be made. To prevent forfeiture, the buyer should abide by these terms accordingly. Finally, ensure the deposit is handled adequately, which means that the buyer should work with a reputable broker, title firm, escrow company, or legal firm.
Do You Get Earnest Money Back?
As long as a buyer follows the terms of the contract and adheres to all deadlines agreed to with the seller, a buyer will most often receive their full earnest money deposit(s) back. Should the buyer fail to comply with the agreement, the seller may be entitled to receive some or all earnest deposit funds.
How Do You Lose Earnest Money?
In an agreement between a buyer and seller, there are often a number of contingencies outlined that spell out the terms where a buyer may back out of an agreement. These contingencies include failure of a home inspection, failure to secure financing, or failure to sell a separate existing property.
If the buyer decides to not proceed with the sale for reasons outside of these agreed to contingencies, the buyer is at risk of losing earnest money.
The Bottom Line
When a buyer and seller enter into an initial agreement to transfer ownership right of property, the buyer is often required to make a deposit of earnest money into an escrow account. There's a number of reasons the buyer and seller can agree to where the buyer can back out of the agreement. However, should the buyer break contract or not meet required deadlines, the seller may be entitled to keep the earnest money as compensation for the break of good faith.
19
Sellers: Make Sure You Ignore This Bad Pricing Advice
Deciding how to price your home is one of the biggest challenges sellers face, and everyone has an opinion. Asking for the right price is important — go too high, and your home will sit on the market. Price your house too low, and it may cost you. In order to keep your listing in line with the market, our real estate agents always recommend using facts and data to support your asking price. You definitely want to steer clear of the following pricing myths:
- Myth: You Should Always Ask For More Than You Paid
While it's true home values appreciate over time, your final sale price will be largely determined by the current state of the market, the value of your home, and what buyers are willing to pay for it. Certain macroeconomic factors, property damage, or even changes to your neighborhood may cause your home value to decline. While you ideally want to earn a profit on your home sale, in some cases it may not always be possible. - Myth: You Should Tack On The Cost Of Upgrades To Your Asking Price
Certain repairs and upgrades might increase your home value, but you probably won't be able to get away with seeking full reimbursement in your sale price. Keep in mind some upgrades see a higher return than others. Work with your real estate agent to prioritize the items that will give you the best return. - Myth: You Should Aim High To Leave Room For Negotiations
Setting a high price might work when selling some items, but it's usually an ineffective strategy when it comes to selling a home. If your price is too high, your home will likely sit on the market, which will cause buyers to wonder if there is a problem. When a home sits on the market, buyers will also be more tempted to submit a lowball offer due. - Myth: You Should Start High If You Don't Need To Sell Right Away
Even if you aren't in a rush to sell your home, setting your asking price high to avoid a quick sale can be a huge mistake. Not only will your home sit on the market, but when you are ready, you'll likely need to decrease the price, which may also signal a potential problem to buyers.
How To Determine Your Asking Price
Instead of setting your asking price based on what you think you should get in return, set it based on actual data. Your real estate agent can provide you with a comparable market analysis report that shows recent sales of similar homes within a one-mile radius of your property. This report can help you better understand the real estate market in your area and can provide realistic price points that help you align your own asking price with other Holland homes for sale.
Pricing your home can be challenging, but the trick is to take a Goldilocks approach (not too high, not too low). Working with a good agent is the best way to determine the right asking price. Contact us to start the process of listing your home today.
12
How To Prepare Your Home For The Appraisal
While a home appraisal is a normal part of the closing process, it's common for sellers to be a bit nervous about the outcome. The purpose of an appraisal is to gain an independent third-party valuation of your property. Naturally, sellers want the appraised value to come back as high as possible. If the appraisal comes in lower than the offer price, then you may need to return to the negotiating table to determine who is going to cover the difference, which could ultimately eat into your return.
While a good portion of your appraisal will be based on recent sales of nearby homes, some of the assessment is subjective. Therefore, doing everything you can to make a good impression can impact the outcome. Our real estate agents suggest these tips for preparing for your home appraisal.
- Put Yourself In A Buyer's Shoes
It's easy to overlook defects and blemishes when you spend every day in your home, but many small issues will stick out to outside parties. Go through your home with a critical eye and look at it from the appraiser's or buyer's perspective. You'll want to make sure to take care of the small stuff: replace light bulbs, repair broken doorknobs, and fix any leaks. Large issues deduct an average of $500 from your appraised value. - Clean From Top To Bottom
You want your home to appear and smell clean during your appraisal, so clean like you've never cleaned before. Scrub every nook and cranny, shampoo the carpets, and dust every surface. Don't forget to clean and powerwash the exterior too! You may even want to consider hiring a professional cleaning company to make your home really shine. - Work On Your Landscaping
Remember, your appraisal is an assessment of your entire property, so you'll want your yard in top shape too. Mow your grass, trim your shrubs, and eliminate any debris. Focus on improving your curb appeal by painting your front door and porch, adding new sidewalk lighting, and planting some flowers. If you need some inspiration on how to make the most of your facade, check out these Holland homes for sale. - Talk To Your Neighbors
If you have any neighbors who recently moved in, speak to them about their experience with the appraisal process. Ask about any major issues that led to deductions in home value. You might be able to learn from their experience and resolve issues before they impact the appraisal. - Notify The Appraiser About New Appliances Or Upgrades
Make sure to let the appraiser know about any recent investments you've made in the property. Things like kitchen appliances may be visible and apparent, but if you recently replaced your sewer line or had the roof or chimney repaired, it might be worth calling it out.
Determining a home's value is an important part of a real estate transaction. We always recommend sellers take steps to improve your appraised value, as it could ultimately help you earn as much as possible on your home sale. If you're thinking about putting your home on the market, contact us today.